Supreme Court Rules States Can Tax All Internet Sales

Now, states can push ahead with legislation requiring companies to collect and remit sales taxes for goods bought online elsewhere.

The move could mean millions for state coffers.

Taxes: Whatever you think about the issue of taxing internet sales, the simple fact is that the Supreme Court has just guaranteed that people across the country will now be paying more in state taxes.

Pressure has been building both in state legislatures and in Washington DC for over a decade to overturn the original decision and several years ago, the US' biggest online retailer Amazon chose to stop fighting it and agreed to voluntarily collect sales taxes.

While the decision does not significantly change the fortunes of big chains or e-commerce retailers, the impact from the decision is likely to be felt by smaller online businesses.

States could collect an additional $8 billion to $13 billion annually in sales taxes, which is a 2% to 4% increase, according to a study by the Government Accountability Office. Some of this is practical: Even internet sales require some physical infrastructure like warehouses, so the biggest companies actually meet the physical presence standard in a growing number of states and cities.

"The Court should not act on this important question of current economic policy, exclusively to expiate a mistake it made over 50 years ago", Roberts said. "As a result, we do not expect today's decision to have any noticeable impact on our business, as it may on other retailers who do not now collect and remit sales tax".

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That said, South Dakota's tax system includes several features that appear created to prevent discrimination against or undue burdens upon interstate commerce.

Tennessee had joined a multi-state amicus brief in support of South Dakota that Slatery said in a statement "highlighted the importance of this source of revenue for the States and the unfairness of the previous rule to our local retailers". It's likely to impact smaller to midsize vendors disproportionately, despite claims by some - including President Trump - that it will target behemoths like Amazon. The DOR decided that as long as a company is doing business in MA using computer software or hardware located in the state, or is using Massachusetts-based delivery services or payment processors, that counts as having a physical presence in the state. Customers were generally supposed to pay the tax to the state themselves if they don't get charged it, but the vast majority didn't.

Stocks of online retailers were down significantly immediately following the ruling. Amazon declined to comment on the Supreme Court ruling Thursday. South Dakota expects to collect another $48 million to $58 million in taxes a year because of this ruling. "For years, this situation has resulted in substantial loss of revenue to states, thus increasing the tax burden on those who do pay the taxes they owe".

For example, the court's majority opinion cites a provision of South Dakota's law that exempts from the sales tax remote sellers with less than $100,000 in sales or 20 transactions a year in the state. The case challenges South Dakota's application of its sales tax to internet retailers who sell into South Dakota but have no property or employees in the state.

The court held that its prior "physical presence rule" was "unsound and incorrect" and so prior decisions from 1967 and 1992 were both overruled. This gave them an advantage over brick-and-mortar stores.

Retail trade groups praised the ruling, saying it levels the playing field for local and online businesses.

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